KUALA LUMPUR (Mar 6): Only life insurance premiums are exempt from the upcoming Goods and Services Tax, said the Life Insurance Association of Malaysia (LIAM).

“This means that policyholders who have purchased or intend to purchase life insurance products such as Whole Life Insurance, Endowment Insurance, Child Insurance, Term Insurance (including mortgage insurance), Education Insurance and Annuity products will not have to pay the 6% GST on their life insurance premiums,” said LIAM in a statement today.

As such, the fees and charges imposed on such policies, like policy fees, are still subject to the consumption tax.

“Similarly, non-life riders such as critical illness, medical and health, and personal accident, the premiums will be subject to GST. As a guide, non-life riders are defined as riders which do not cover natural death,” clarified LIAM.

In addition, although GST is only applicable beginning April 1, LIAM said “policyholders who have purchased non-life riders before 1 April 2015, will be required to pay GST on the applicable portion of insurance premium/fee/charges for insurance coverage from 1 April 2015 onwards”.

It also said its member insurance companies have already notified their policyholders via their websites, premium notices and notification to increase direct debit authorisation limit.

“We would also like to advise all policyholders to contact their respective insurance companies to find out the amount of GST that they will have to pay for their medical and health, critical illness and personal accident policies that are due on 1 April 2015 onwards,” LIAM added.

For policies paying through direct debit facilities, insurance companies will work with banks to increase the authorisation limit accordingly to include GST, it said.

“However, policyholders are also advised to contact their respective insurance companies directly to clarify if fresh authorisation forms need to be submitted to increase authorisation limit to cater for GST payable, to ensure premium are successfully deducted and to keep their insurance policy status in-force,” it said.